New Zealand Dollar softens below 0.5900 on US-Iran talks uncertainty, stronger US PMI data

The New Zealand Dollar (NZD) weakened against the US Dollar (USD) to near 0.5870 on Tuesday, amid uncertainty surrounding US-Iran talks and stronger US economic data. Traders are watching New Zealand's employment report due later on Wednesday. US manufacturing sector activity expanded at an accelerating pace in July, with the ISM's PMI rising to 55.6 in July from 53.3 in June, above the market consensus of 54.0.

However, the potential failure of US-Iran negotiations has bolstered the safe-haven USD. US President Trump stated he is giving Iran "every last chance" to reach a deal, despite Iranian officials denying direct talks and negotiating with mediators in Oman. New Zealand's unemployment rate is expected to rise to 5.4% in Q2 from 5.3% in the previous reading.

Analysts from ASB anticipate the Reserve Bank of New Zealand (RBNZ) will continue tightening toward a 3.25% OCR by year-end, while Westpac forecasts hikes in September and December, pushing the OCR to 3.75% within a year. The NZD is seen as supportive of additional RBNZ rate hikes, backed by favorable labor market conditions. Factors such as Chinese economy performance and dairy prices also influence the NZD.

The RBNZ aims to maintain inflation between 1% and 3% over the medium term, setting interest rates accordingly. Macroeconomic data releases in New Zealand impact the NZD's valuation, with strong economic data supporting the currency during risk-on periods.